Cantor Exchange expects to receive final regulatory approval by Tuesday, April 20, 2010, and will commence trading of DBOR Movie Futures shortly thereafter.

While waiting for the market to launch, Cantor Exchange is inviting you to join It Pays to Practice, a free promotion that lets you try to earn real cash from practice trading between now and March 31, 2010.

Here’s how it works: everyone starts with 10,000 “virtual dollars” in a Cantor Exchange practice account, and at the end of the practice period for each 1,000 virtual dollars of profit you earn we will deposit $10 cash into your real-money trading account (maximum $100 per trader). So if you earn 10,000 virtual dollars in profit while practicing on Cantor Exchange, you get $100! There is no cost to participate in this program. For complete details, please see the official program rules.

For details on the first promotion period (ending December 31, 2009), please see the official program rules for Round 1.

You must sign up to participate in this promotion. If you are not currently registered, please register now. Invite your friends to join, too!

In addition to the chance to earn cash, this program is also a great way to sharpen your skills and get ready for the launch of real-money futures trading in April.

Membership Fees and Discounted Trading Fees
We do not currently have any fee discounts available. Please check back in the future to see if we announce new plans. The details of our current fee structure are on our Fee Schedule page.

Submit your application today - the sooner you apply, the sooner you can start trying to earn real cash in It Pays to Practice on the Cantor Exchange!

IMHO, it's finally good to see this come to fruition. I've been playing the Hollywood Stock Exchange (www.HSX.com) for years, and now I can hopefully finally turn some of that research into actual market returns.

If the studios and/or production companies movie into this with gusto, could definitely see a nice efficient market mechanism develop.

it's interesting that HSX thought Avatar was going to be a bust and I do not think anyone in the biz thought so. And who saw Hangover coming except for us? Plus we see the screenings so I think it is a real positive and fun tool. I will be meeting with Cantor and working out a deal to promote it on bigscreenbiz.

LOS ANGELES — In a show of solidarity, many of the film industry’s major players, and some sympathetic lawmakers, have aligned in an 11th-hour push to block new financial instruments that would allow traders to swap contracts tied to box-office results.
Gregg Matthews for The New York Times

Bob Pisano of the M.P.A.A. is now leading a bloc against the futures exchange.

A coalition led by the Motion Picture Association of America was expected to file by Thursday comments that would urge the Commodities Futures Trading Commission to reject a request by Veriana Networks to create a market for film futures contracts. Some of Hollywood’s largest labor unions and professional organizations will back the M.P.A.A.’s push.

Among those who spent the week coordinating their objections were the Directors Guild of America, the International Alliance of Theatrical Stage Employees and the Independent Film and Television Alliance. The M.P.A.A. represents the major film studios, including 20th Century Fox, Paramount Pictures, Sony Pictures Entertainment, Universal Studios, Walt Disney Studios and Warner Brothers.

The expected comments will address the first of four approvals that would allow Veriana Networks and a separate exchange run by Cantor Fitzgerald to begin making markets in the contracts.

Over the last two weeks, California’s two senators, Barbara Boxer and Dianne Feinstein, sent the commission a joint letter urging caution in approving the contracts. Representatives Lamar Smith of Texas, Robert W. Goodlatte of Virginia and Henry A. Waxman of California sent similar letters.

Both the Cantor futures exchange and Veriana Networks would allow investors to buy or sell — or “short” — contracts based on a movie’s box-office receipts, in essence betting on how well a film will do when released in theaters. On the proposed Cantor exchange, for example, contracts would trade at $1 for every $1 million a movie is expected to bring in at the domestic box office during its first few weeks in theaters. If a contract is bought for $100 and the movie grosses $110 million, the trader makes $10. If another investor shorts the movie, selling the $100 contract, that investor loses $10.

The Veriana exchange would be open only to institutional investors, while the Cantor exchange would be open to anyone.

“I don’t know of any major representative in our sector that is supporting it,” Bob Pisano, the M.P.A.A.’s president, said on Wednesday.

While the industry’s opposing comments were not yet final on Wednesday afternoon, Mr. Pisano and others said they were expected to cite a host of potential problems. Those include the risk of market manipulation in the rumor-fueled film world, conflicts of interest among studio employees and myriad contractors who might bet with or against their own films, the possibility that box-office performance would be hurt by short-sellers, difficulty in getting or holding screens for films if trading activity indicated weakness and the need for costly internal monitoring to block insider trades.

Among the potential abuses, the studios contend, is that a speculator might leak an early version of a film to the Internet and then profit from its subsequent poor performance at the box office.

A final ruling from the commission on Veriana’s exchange is expected on Friday. Cantor expects to get its approval by April 20, and the company is so confident that it has been allowing customers to add money to their accounts since March 15.

Both companies say they remain hopeful that the applications will be approved.

“If they want an open dialogue, we’re happy to do that and happy to restart the approval of the product,” said Rob Swagger, Veriana’s chief executive.

Richard Jaycobs, the president of the Cantor Exchange, said he had been meeting with film investors since the movie association sent a letter last month objecting to the exchanges. Mr. Jaycobs said the exchanges would help bring more transparency to the business.

Both Cantor and Veriana say that their exchanges are intended to give Hollywood investors a way to mitigate their risks. If a distributor has second thoughts about a movie, the company could short it on the exchange.

But Mr. Pisano said he had been assured that none of the major film companies intended to use the contracts for hedging.

Mr. Pisano acknowledged that the industry and its allies had been slow to respond to what they now considered a major threat.

He said his organization customarily monitored action by the Federal Trade Commission and the Federal Communications Commission, but did not look closely at commodities regulation and focused on the new contracts only after reading recent media reports about them.

In a letter responding to the movie association’s earlier objections, Mr. Jaycobs wrote that Cantor had approached the M.P.A.A. multiple times since March 2009 to discuss the exchange. Except for an acknowledgment of the contact, the association gave no “substantive response or objection” until the letter last month, Mr. Jaycobs wrote.

The industry take on this as some kind of threat is really strange to me. It would be as if Exxon or BP opposed the creation of crude oil futures. Or perhaps a farmer complaining about people trading corn futures.

Some of the strange scenarios they reference (pre-screening to profit for bad box office results, etc) don't even seem reasonable. The Cantor Exchange (for example) doesn't allow people who would be considered "insiders", like theater owners, or folks who work for Rentrak, or movie studio employees become members to trade the box office futures. Additionally, those same insiders (the companies) could restrict the chance for malfeasance by limiting their enployees' ability to trade the box office futures. A similar example would be that way that investment banks and brokerage houses restrict the stocks or financial instruments that their employees can trade as a condition of continued employment. The CFTC would handle the high-level enforcement and investigations into misbehavior, similar to how the SEC/FINRA does for people who trade stocks and bonds. The fears of the industry are akin to if a large corn farmer scrapped his own crop yields in order to drive the price of the already harvested corn up. Kind of like shooting oneself in the foot.

If anything, box office futures - assuming they had sufficient volume on the exchanges - could help studios hedge against films that that might be seen as iffy box office performers. For something like 'Evan Almighty' (just an example of a more recent big budget flop), the studios could offset portions of the production costs by writing futures contracts on the exchanges.

Given the lumpiness of Hollywood's revenues/box office grosses, I have to wonder why the studios wouldn't welcome the creation of financial instruments that allow them to hedge future risk. Since markets and investors typically reward companies who produce more stable cash flows/earnings over an extended period with higher valuations or earnings multiples, I'd think that as profit-seeking enterprises, studios would want to become stakeholders or at least encourage things like these exchanges.